Refinance calculator

What your refinance result shows

The monthly saving and the break-even are the two figures every refinance calculator gives you, and on their own they are misleading. A lower payment can come from a lower rate, from a longer term, or from both — and only the first of those makes the loan cheaper.

So this page also reports total interest on each path. Refinancing 26 remaining years into a fresh 30-year term adds four years of borrowing, and at a modestly lower rate that frequently costs more in total than it saves, even though the payment falls and the break-even looks fast. When that happens the line says lifetime interest added, not saved.

The last figure is the comparison that isolates what you are actually buying: the new rate over your existing remaining term. Same finish date, better rate, and the interest saving is unambiguous. If a refinance only works by extending the term, then what you are buying is cash flow — which can be a perfectly good reason, but it is a different purchase from saving money.

How to use this calculator

1. Current balance, rate and time remaining from your statement. The remaining term matters as much as the rate.
2. New rate from a quote if you have one. The prefilled figure is the national average, which is a starting point rather than an offer.
3. New term. Run 30 years, then run your remaining years, and compare the two total-interest lines. This single comparison is the point of the page.
4. Closing costs, and whether you pay them or add them to the loan. Rolling them in is convenient and means paying interest on them for decades.
5. Cash out, in the advanced panel, if you are borrowing more than you owe.

The break-even figure, and its limits

Break-even divides the closing costs by the monthly saving: the number of months before the refinance has paid for itself. If you might sell or refinance again before then, the costs are not recovered and the exercise loses money.

The figure’s real limitation is that it ignores the term entirely. On the default figures above the refinance breaks even in two years and still adds over seventeen thousand dollars of lifetime interest, because four extra years of borrowing outweigh the lower rate. A fast break-even and a more expensive loan are not contradictory, and most calculators show you only the first half of that.

One deliberate choice here: when you roll the closing costs into the loan, this page still charges them against the break-even rather than reporting that there is nothing to recover. There is no cheque to write, but the money is just as real — you have simply agreed to pay interest on it for the whole term.

The more robust test is to ask three questions in order. Does the rate genuinely improve? Would the interest saving hold if the term were unchanged? And will you be in the loan long enough for the costs to be recovered? A refinance that passes all three is straightforward. One that passes only the first is worth looking at harder.

When refinancing clearly makes sense

• The rate has fallen meaningfully since you borrowed, and you are staying long enough to recover the costs.
• Your credit has improved materially, moving you into a better pricing tier than the one you signed at.
• You are shortening the term — refinancing 26 remaining years into 15 usually raises the payment and cuts total interest dramatically.
• You want out of mortgage insurance and have reached 20% equity, where a refinance can remove it if your lender will not otherwise cancel — particularly relevant on FHA loans with life-of-loan premiums.
• You are leaving an adjustable rate before it resets, converting an unknown future payment into a fixed one.

And when it usually does not: when the only gain is a lower payment from a longer term; when you are moving within a couple of years; or when the costs are large relative to a small rate improvement. A useful reframing — if you want a lower payment on the loan you already have, a recast costs a few hundred dollars rather than several thousand, and does not restart the clock.

Cash-out refinancing

A cash-out refinance replaces your mortgage with a larger one and hands you the difference. The rate is usually a little higher than a straight refinance, and lenders limit how much equity you can extract — commonly leaving at least 20% in the property.

It is the cheapest large borrowing most households can access, and the reason to be careful is the same as the reason it is cheap: the debt is secured on your home and stretched over decades. Borrowing for a renovation that adds value is a defensible use. Borrowing to consolidate card balances lowers the rate substantially and converts unsecured debt into secured debt — a real saving and a real transfer of risk, worth doing only alongside whatever stopped the balances rebuilding.

Compare it against a home equity line before deciding. A HELOC leaves your existing rate untouched, which matters enormously if you are sitting on a low legacy rate — refinancing a 3% mortgage to extract cash means giving up that rate on the entire balance, which is almost always the wrong trade.

Shopping the rate, and reading the Loan Estimate

The rate you are quoted is not a market fact. It reflects your credit score, your loan-to-value ratio, the loan amount, the property type, whether you occupy it, and how much of the lender’s cost you are willing to pay up front. Two lenders pricing the same borrower on the same day routinely differ by a quarter point or more, and on a large balance a quarter point is worth tens of thousands over the term.

So collect more than one Loan Estimate. It is a standardised three-page form, which means the figures are directly comparable between lenders — unlike a rate quoted over the phone. Two lines on it matter most here. Page one carries the rate, the monthly principal and interest, and whether the rate can change. Page two itemises the closing costs, split into what the lender charges, what you cannot shop for, and what you can. That second column is where the differences between offers hide.

Then look at the APR next to the rate. It folds the lender’s fees into a single annualised figure, which makes it a better comparison between two offers than the rate alone — a lower rate bought with high fees shows up as a higher APR. It is imperfect, because it assumes you hold the loan to term, but as a screening tool between competing offers it is the honest number.

Applications made within a short window count as a single inquiry for scoring purposes, so comparing four lenders costs you no more than comparing one. Once you accept an offer, ask how long the rate lock runs and what an extension costs — locks typically run 30 to 60 days, and a lock that expires before closing puts you back at whatever the market is doing that week.

What this calculator assumes

• Fixed rates on both loans, held to term, with no further refinancing.
• Principal and interest only. Property tax and insurance continue either way and are unaffected — see the mortgage calculator for the full payment.
• Closing costs as entered. They vary widely; a Loan Estimate is the authority, and lender credits can reduce them in exchange for a higher rate.
• No prepayment penalty on the existing loan, and no escrow refund timing effects.
• No tax effects. Mortgage interest may be deductible if you itemise, which slightly reduces the benefit of paying less of it.
• Lifetime interest compared over each loan’s full term, which is the honest basis but assumes you keep both to the end.

These are planning estimates. Compare Loan Estimates from more than one lender — several applications within a short window count as a single credit inquiry.

Refinancing questions people ask

Related calculators

See all networth.com calculators →